The recent Lenskart IPO filing has ignited familiar debates across social media platforms, but according to investment expert Dhirendra Kumar, much of the criticism is misdirected. The founder and CEO of Value Research argues that the Securities and Exchange Board of India (Sebi) should not function as an investment advisor for public offerings.
The Lenskart IPO Controversy
When Lenskart filed for its public offering at what many considered a stratospheric valuation, internet investigators quickly uncovered concerning details. The company's promoters had reportedly acquired shares just two to three months earlier at approximately one-eighth of the valuation they were asking public investors to pay.
Adding to the concerns, Lenskart had been a consistent loss-maker until miraculously turning profitable this year through a non-cash, one-time accounting entry. The combination of these factors created what Kumar describes as all the ingredients of a wealth transfer from naive investors to savvy promoters and early backers.
Misplaced Regulatory Outrage
While Kumar personally finds such public offers unattractive and cautions retail investors against them, he strongly disagrees with the widespread criticism directed at Sebi for allowing the IPO to proceed. Many commentators have accused the regulator of negligence and demanded that it protect investors from what they perceive as predatory offerings.
This line of thinking represents a dangerous confusion about market regulation, according to Kumar. Sebi's primary responsibility is to ensure transparency and enforce legal compliance, not to judge investment quality.
The Real Purpose of Market Regulation
Kumar emphasizes that Sebi must ensure companies disclose all material information accurately, follow prescribed IPO procedures, and prevent fraudulent activity. If Lenskart has properly disclosed recent promoter transactions, explained its financials in the prospectus, and complied with legal requirements, then Sebi has fulfilled its mandate.
The alternative—where Sebi acts as an investment advisor approving only good IPOs and rejecting bad ones—would be far worse. Who decides what valuation is reasonable? Should Sebi impose price-to-earnings caps or mandate profit margins? These would become arbitrary rules that stifle market function rather than improve it.
Today's investors have access to comprehensive information that wasn't available during the IPO manias of the 1980s and 1990s. Back then, companies would fabricate financial statements, make impossible promises, and sometimes disappear after collecting investor money. Parliament even established a committee to investigate these disappearing companies.
Current IPO frameworks enforce transparency, ensuring that companies disclose critical information and follow established processes. Investors can see what they're buying, even if some choose not to examine the details closely enough.
Investor Responsibility in Modern Markets
Kumar argues that some investors expect full-time handholding from regulators, seeking protection not just from fraud but from their own poor judgment. This approach is both impossible and undesirable for functional markets.
Markets operate effectively because participants can make independent decisions based on available information. Some will make good choices, others will make poor ones, but this process enables price discovery, market efficiency, and investor learning.
The fundamental principle remains straightforward: if you find an IPO unattractive, don't invest in it. While Kumar often advises that IPOs are rarely suitable for retail investors, he doesn't expect regulators to prevent others from making investments he would avoid.
What investors truly need are transparent and well-functioning markets, not a nanny state that determines which investments are acceptable. The freedom to make good investment decisions inherently includes the freedom to make bad ones.
